Most companies have a wide variety of purchasing needs. Corporate purchasing, however, is often difficult to manage and control efficiently. For example, purchases that are made as company or organizational expenses, such as purchases of office products, office supplies, services, and marketing materials, are often handled through purchase request and approval processes with associated payment procedures. These procedures, however, are typically inefficient. In addition to purchase request and approval processes, reimbursement procedures are also used for corporate expenditures. For example, individual travel and entertainment expenditures are often handled through reimbursement procedures where employees must first pay for the expenditure and then seek reimbursement. Reimbursement procedures, however, are typically inefficient and are often undesirable to employees who must make the expenditure with their own funds and then hope that they are doing so within approved guidelines so that they will be reimbursed.
Because of inefficient procedures typically utilized, purchasing management often generates significant costs for most companies. This purchasing management is made even more difficult and complex due to a wide variety of sales channels or markets from which most companies purchase products and services. These sales channels include, for example, catalog sales, in-store sales, telephone sales, on-line sales (retail websites, public marketplaces/exchanges, private marketplaces/exchanges, etc.) and various other available sales channels. Regardless of the product or service being purchased or the sales channel or market from where the product and service is being purchased, it is desirable for companies to have the ability to manage the purchasing of those products and services through one common purchasing and approval process.
Typical purchasing management solutions have been business-to-business electronic commerce applications that automate product procurement. These systems, however, are often simple Web-based solutions (e.g., web sites maintained by office supply retailers) that do not provide the buyer with the capability of managing its procurement process across multiple suppliers or, alternatively, are large, enterprise-based solutions that require deployment of specialized programs at each client (e.g., computer workstation). While the latter applications often provide a Web-based interface via the Internet, they are undesirable because client-side software must often be deployed, maintained and frequently upgraded. These customized systems are also quite costly and require the creation and management of an “instance” of the software application for every deployment of the application. As a consequence, these enterprise-type application systems have not been implemented on a widespread basis and are not practical for most companies' purchasing management. Thus, there remains a need to provide new techniques for managing the purchasing process that overcome these and other problems and deficiencies of the prior art.
With respect to how companies make purchases, banks and financial institutions offer a variety of payment mechanisms, including payment cards such as credit cards, stored value cards, commercial cards, corporate cards, fleet cards, procurement cards, purchasing or “P” cards, and smart cards. These traditional offerings, however, are all of limited usefulness as a tool for purchasing management. Credit and debit cards can be set up as company cards, where the company or its accounts are responsible for purchases, or as individual cards, where the employee or the employee's accounts are responsible for purchases. Companies are typically very reluctant to issue company credit or debit cards, thereby giving employees the ability to create company debt or expend company funds without pre-approval. If employee accounts are used, the transaction is treated as a reimbursement transaction.
Stored value cards are essentially pre-paid credit cards with predetermined spending or credit limits. These stored value cards have been marketed to consumer markets, for example, as a mechanism to allow parents to control the spending of their children while providing the ease of credit card purchases. Smart cards are cards that include integrated circuits. The increased memory and processing power of smart cards have been advertised as potentially allowing banks and financial institutions to provide increased utility, functionality and convenience to users. A big downside to smart cards, however, is that smart cards will likely require a new infrastructure to be adopted and put in place by merchants before any newly developed features may be utilized.
Purchasing card programs are payment mechanisms offered by banks and financial institutions that are more specifically directed to help company payment needs. Purchasing cards or “P” cards are essentially company credit cards with a few additional control features that allow companies to pre-approve cards using a few static limitations, such as pre-approved vendors, pre-approved transaction amount limits, and pre-approved overall credit limits. Once set up, these purchasing cards essentially act as credit cards with pre-determined static limitations. Thus, although purchasing cards allow more control than do typical credit cards, the company still has no control over specific purchases initiated by employees because the card limitations are static and spending requirements have all been pre-approved for a given card. In short, purchases may be completed without ever being reviewed or approved in light of company purchasing policies. Purchasing cards, therefore, fall short of providing a desirable purchasing management solution.
Purchasing card programs are effectively distributed credit card programs. Purchasing cards generally feature company billing, as opposed to the individual billing of a corporate card, and specific company constraints at both the master account and individual card levels. Based on traditional card processing capabilities, the types of constraint and approval parameters that can be statically configured by the bank for purchasing cards include the following example control features as shown in TABLE 1.
TABLE 1Example Control Features for Traditional Purchasing CardsParameterDescriptionCreditOverall card limits.limitsVelocityVelocity is an availability control for throttling spending.Velocity is described in dollars and numbers of transactionsand can be specified by time period or aggregated over thelife of the card. Velocity controls authorizations.SlotsA typical purchasing card has nine “slots” (MCC Groups)for unique configuration. Slot applicability is governed bySICs (Standard Industrial Codes) or MCCs (MerchantCategory Codes). Velocity settings can be made at theslot level as well as at the card level.PoS IDsPreferred merchants (by point-of-sale terminal IDs) areapplied to individual slots and are incremental constraintsto the SIC or MCC codes which determine slot applicability.AmountMaximum transaction amount.
Changing these parameters has traditionally required an authorized company representative or employee to determine what changes need to be made, to contact the bank and to request that the change be made. This manual intervention and subsequent action by bank employees or other individuals must be accomplished every time a change is desired to the control features of any given card. Not surprisingly, most companies find it easier to use a different form of payment than to change the constraints every time an exception occurs. Consequently, increasing control over the spending decreases the amount of company spending that is done with a card and decreases the associated processing efficiencies promised by the card program. This contradiction also limits the bank's growth opportunity on multiple fronts, including lost interchange revenue every time an exception occurs (the spend goes outside the card network), and lost customers due to a participating company's either limiting card use, a potential customer not implementing a card program, or a company with an established card program terminating the program. In short, these static constraints decrease the general utility of the purchasing card and thereby decrease the associated licensing and interchange revenue captured by the issuing bank.